Market Cycle

Market Cycle

Understanding market cycles can help investors make better decisions; however, there are no magic rules to determine when to enter a market. 

Market cycles refer to recurring patterns in which prices move. While price levels may differ at various phases, patterns can still be observed in their movement. Using these patterns, decisions can be made on whether to accumulate or sell holdings. It's important to note that, despite recognising patterns, there is no guarantee that future prices will follow historical patterns. Essentially, when you invest, you are betting on the market heading in a certain direction influenced by investor psychology, the collective emotions of individuals like you and me. If the majority of investors collectively believe, based on various factors, that prices will move in a particular direction, they will collectively drive the market accordingly. This sentiment is reflected in price charts as recurring patterns, providing insights into the current market sentiment. Patterns are generally more reliable when analysing longer-term prices (e.g., monthly movements) compared to short-term periods (e.g., hourly movements), as this approach eliminates impulsive purchases and considers market corrections.

Bitcoin Market Cycle

Below is the market cycle of Bitcoin until the end of 2022 from Investopedia.

You can see some a pattern where there is a build up followed by a spike before it comes down. And the it repeats. However, it repeats at different price levels and doesn't necessarily repeat at same intervals.

Bitcoin Halving

Many have highlighted a pattern with how the price moves for Bitcoin based on the 4 yearly 'Halving' event. There are limited number of Bitcoins and the reward for Bitcoin miners half every years and this is called the 'Halving'. In the chart below, you can see how the prices of Bitcoin has moved historically.

And the next Bitcoin halving is fast approaching! Again, historical data can indicate future price movements but it's not a guarantee.

Investing?

One popular crypto currency exchange in Australia is Sywftx. Another popular one is Binance. These are my referral links if you decide to join.

Investing in Crypto - Beginners guide

 Cryptocurrencies

In very simple terms, cryptocurrencies are akin to regular currencies but exist in digital format stored within digital or physical wallets. In digital form, your 'cryptocurrency' is identified by alphanumeric characters, similar to a serial number on physical currency notes. These are then stored in a wallet with unique addresses, comparable to a bank account number. While the central bank manages records of all traditional currencies in the market, cryptocurrency records are stored in the cryptocurrency's network of computers, accessible to the public through a blockchain explorer. As transactions and wallet addresses are publicly available, it is crucial to ensure the security of your wallet.

You can acquire cryptocurrencies with real money through various crypto exchange services. Subsequently, you can use these cryptocurrencies to purchase goods or services.
One popular crypto currency exchange in Australia is Sywftx. Another popular one is Binance. These are my referral links if you decide to join.

In the wake of banking crisis in 2008, concept of digital currencies that aren't controlled by central banks, the concept of cryptocurrencies took off!

Why cryptocurrencies?

Cryptocurrencies emerged with the creation of Bitcoin in 2009 after Satoshi Nakamoto, published the Bitcoin white-paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" in 2008. The primary motivation behind Bitcoin was to challenge the 'centralised' banking system with a decentralised form of currency that operated on a peer-to-peer computer network without needing the banks. The breakthrough technology enabling this innovation is blockchain, a decentralised and distributed ledger that records all transactions across a network of computers. Bitcoin's genesis block, mined by Nakamoto in January 2009, marked the initiation of the cryptocurrency era. Bitcoin then paved the way for the development of numerous alternative cryptocurrencies (altcoins) and the broader adoption of blockchain technology in various industries. The advent of cryptocurrencies has since revolutionised the financial landscape, offering new possibilities for decentralised, transparent, and secure transactions.

Investing

The first thing that must be mentioned is: do not rush to buy anything just yet. Take the time to read and research before making any investments. Even the most popular cryptocurrency, 'Bitcoin,' has gone through turbulent times. Hence, it's important to understand what cryptocurrencies are and whether you should invest in any of them.
While investment decisions are personal, due to the volatile nature of crypto markets, it is recommended that cryptocurrency comprises only a part of your investment portfolio.
Before investing in cryptocurrencies, it is advisable to take the time to research whether they are currently facing legal challenges. More importantly, determine whether they are genuine projects and not scams, such as Squid Game Crypto.
If you do decide to invest, consider purchasing small amounts as oppose to using up all your budget in one single purchase. Timing the market is extremely difficult and this will ensure that you are not purchasing at peak or bottom and is less stressful as well.